Tax ratio- GDP may hike due to GST

By Registrationwala

11th August 2017

GST has become a boost for the tax system. The centre is expecting that the GST and increased shall boost tax revenues in India for next two years. An assumption has been made that GDP ratio will be close 12 per cent by FY20. The higher revenues are projected to push up capital spend of the government, bring down fiscal deficit to sustainable 3% of GDP and lower the revenue deficit to 1.4% of GDP by FY20. The medium-term expenditure framework released by the government on Thursday shows tax-to-GDP ratio rising 30 basis points each in FY19 and FY20 to 11.6% and 11.9% respectively. The government expects any shocks to tax collections due to the introduction of GST to be absorbed in the current fiscal. It said “going forward in the years 2018-19 and 2019-20, the gains from expansion of the tax base due to the introduction of GST and the increased surveillance post demonetisation will ensure that tax-GDP ratio will increase by 30 basis points in each of the above FYs in question. Read more